Time Inc. Speaker Says USPS in Decline

PORTSMOUTH, NH -- The U.S. Postal Service is entering a death spiral of declining revenue, rising expenses and rapidly escalating rates, attendees of the New England Mail Order Association Fall 2002 Conference were told yesterday.

Jim O'Brien, director of distribution & postal affairs at Time Inc., New York, delivered the sobering thought at the postal reform session. Among the evidence he cited:

· From July 13 to Aug. 9, year-to-date volume declined in all mail classes versus the same period last year.

· Jupiter Media Metrix indicates that 7.8 million households will use electronic bill presentment and payment this year, with projected growth to 44.5 million households by 2006. First-Class mail generates 57 percent of USPS revenue.

· Through Aug. 9, the USPS had a net loss of $871.4 million versus last year's $1.059 billion loss. The losses come despite three rate increases within 18 months. "They're doing better," said O'Brien, whose comment drew laughter from the audience.

· Labor represents 79 percent of operating expenses while work hours have been reduced by 71,649 compared with last year (4.8 percent). "Jack Potter is doing a fine job of drawing labor costs out of the system, but everybody got a raise [so] he's just keeping himself even," said O'Brien, who also mentioned that the USPS loses 44,000 employees annually through attrition.

· In terms of deferred retirement liabilities, the balance sheet shows a liability of $32.4 billion with liability rising by $2.5 billion in one year. The General Accounting Office indicates that the current unfunded retirement plan and healthcare liability of $9.3 billion annually will balloon to $16 billion by 2010. "Guess where the money will come from," O'Brien said. "All of the ratepayers. We're going to have to pick up the tab for this."

· At the end of fiscal year 2001, the USPS was $11.3 billion in debt and will add less than $1 billion in fiscal year 2002 with a statutory debt limit of $15 billion. "What happens when they hit the limit?" he asked. "[U.S. Sen.] Ted Stevens said, 'We're going to raise the limit.' They'll just write a bigger check."

· A total productivity increase of 11 percent for the past three decades compares with a 73 percent improvement for non-farm businesses in the private sector in the same time, while Quad Graphics has increased productivity 7 percent per year in the past 20 years.

O'Brien discussed the difficulties in fostering a performance-based culture, a problem he tied to unions and work rules. Though he characterized the USPS as a $60 billion-a-year business, he said that the postmaster general can't make more than "about $160,000 per year."

The possibility of a presidential commission was characterized as providing hope for the future since it would give Congress the political cover to act.

"I've met with White House staffers six times in the past year, and they are looking for names for the presidential commission," he said. "A commission of independent businesspeople can get together, and the politicians can say, 'It's not me.' "

O'Brien also promoted the use of grass-roots efforts to push postal reform.

"Members of Congress have told me that one visit from a constituent in my local office in their home district is worth 100 lobbyists coming to see them in Washington," he said. "[That type of activism] will give Congress a reason to act."